While the Greek bailout debacle continues to wind and waver, it is an interesting phenomena pitting economic, political, societal and social ideals against one another. The bailout certainly isn’t new, it has been an ongoing grind for five years that has only recently come to a fullblown volcanic eruption reminiscent of the ancient Greek ruins.
Looking back at the cause of Greece’s demise gives some clarity into why a bailout is simply a band-aide at this juncture:
Corruption of the system has been ongoing for decades. But the basis is rooted in a ethical and moral demise that has become so pervasive no one really cares. Tax evasion is rampant. Some estimates describe the ‘game’ as a common occurrence – 6 out of 10 Greeks pay no taxes. Not because they don’t have the income but because – they can get away with it. It was and is a country mired in no fiscal policy whatsoever. Spending was backed by borrowing, borrowing was backed by more borrowing. Revenue was not the focus and thus the entire house of cards was easily blown apart.
Despite the government threatening Greek citizens to pay their outstanding taxes, it is a farce. Given returns were not even filed, the estimates of liability are simply that – estimates. And the threat – a published list of your name – is more of a boogeyman threat than a true consequence. Wealthy businessmen, pop stars, doctors, lawyers, politicians, you name it – could care less. A threat that has no consequence, is as worthless as the country. Money was diverted to Swiss bank accounts and their hands were cleansed.
This is the mentality. A Greek bailout would produce nothing of change, only a greater and more radical exodus of sheltered money until the next crisis. The terms of the ‘new and improved’ bailout include greater spending cuts and higher taxes… What incentive do the people really have? Lower wages (spending cuts would trickle) and higher taxes (on people that don’t file)– means less people paying taxes, more evasion and another fallout. A Greek Ruin.
Know when to hold ’em, know when to fold ’em, no when to run!
Tsipras inherited a no win situation. He knows it and has rightly deferred to the people, the contingent that he leads. Asking for a referendum makes sense, it leaves the fate to those that created the mess – the people.
Since the early 1990’s the Prime Ministers of Greece have all hailed from elite American and UK schools, predominantly in the fields of law and economics. The schooling includes our own president’s alma mater, Harvard. Presumably well educated in how to valiantly run an economy and democratic political system, they blame the Ottoman Empire for their failures. Not unlike our own president who blames the failures of his administration on rooted economics of previous president’s, perhaps the Greek corruption scandal is truly a lesson we need to pay attention to lest we allow ourselves to blindly follow into the blood of borrowing to pay borrowing debt.
Like a computer, Greece is now far past the potential of a bailout and needs a complete ‘reboot’. They can not change the cards they hold and the game is lost. Germany stands to lose the most in a Greek exit scenario – potentially as high as $84 billion. But nothing is so simple. Previous Greek bailouts have simply done – nothing. To think that rolling the terms to a longer time frame is ludicrous as it only prolongs the inevitable. It is not much different than our current agenda of proposing changes that are slated to be addressed 75 years from now… It is a sloughing off of responsibility – a band-aide at best solution while the cancer metasticizes.
In 2010, Greece received $105 billion in bailout funds. The economy of Greece is estimated to be worth $242 billion. The second bailout rescue in 2012 was valued at $170 billion. In the span of just five years, Greece has gone through $275 billion, more than the value of the entire economy. To think that throwing more money into the melt will have any positive outcome is beyond ludicrous and borders on insanity. If you bought a computer for $1000 and it broke five years later, would you spend $1200 to fix it knowing that in another year you would pay another $500 to fix it again, or would you simply buy a new one for $1200?
Does this mean that Greece is forever doomed? No. The collapse of the Soviet Union is an example of complete economic failure and collapse and the determination to rise and recover from nothing. While the model is riddled with imperfections – to quote Anna in the King And I, “At least he tried.”
Greece – is not trying and needs the opportunity to do so – alone.